Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: 1.Whether 'top-up' pension contributions to a United Kingdom pension are deductible for Canadian income tax purposes.
2. Whether future United Kingdom pension income is taxable for Canadian tax purposes.
Position: 1. No
2. No
Reasons: 1.There is no provision in the Act that provide for a deduction of the foreign pension contributions. The Canada-United Kingdom Tax Convention does not provide any relief.
2. The future pension income from the UK will be taxable in Canada for Canadian income tax purposes.
XXXXXXXXXX
November 15, 2011 2011-041360
J. Nichols
Dear XXXXXXXXXX :
RE: United Kingdom Pension Contributions
We are writing in reply to your letter dated June 14, 2011 requesting our view as to whether contributions to the United Kingdom ("UK") government's national insurance pension plan ("UK Pension Plan") are deductible and whether any future payments from the UK Pension Plan would be included, in computing a Canadian resident's income in the situation described below:
1. The taxpayer is a former UK resident.
2. The taxpayer has been a resident in Canada since 1976.
3. The taxpayer has been retired since 2004.
4. The taxpayer has been making voluntary "top-up" contributions to the UK Pension Plan.
Our Comments
Generally contributions to a pension plan are only deductible in computing a Canadian resident's taxable income where the pension plan has been registered by the Canada Revenue Agency for the purposes of the Income Tax Act (the "Act"). The UK Pension Plan does not meet this requirement, and therefore none of the contributions to the UK Pension Plan would be deductible in computing the contributor's Canadian taxable income. With respect to future payments from the UK Pension Plan, the recipient of any such payments would be required to include such amounts in computing their Canadian taxable income pursuant to subparagraph 56(1)(a)(i) of the Act. Moreover, paragraph 1 of Article 17 of the Canada-United Kingdom Income Tax Convention confirms Canada's right to tax such payments.
We trust our comments will be of assistance.
Yours truly,
Shelley Helmer
for Director
International Section II
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch
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